Directors who are not signatories of a dishonoured cheque cannot be prosecuted under Section 138 read with Section 141(1) of the Negotiable Instruments Act unless the complaint specifically avers that they were “in charge of and responsible for” the conduct of the company’s business; reaffirmed as binding precedent following Supreme Court judgments, binding on subordinate courts in Punjab and Haryana.
Summary
| Category | Data |
|---|---|
| Case Name | CRM-M/5022/2024 of POONAM BHADOURIA AND OTHERS Vs STATE OF HARYANA AND OTHERS |
| CNR | PHHC010107282024 |
| Date of Registration | 29-01-2024 |
| Decision Date | 30-10-2025 |
| Disposal Nature | DISPOSED OF |
| Judgment Author | MR. JUSTICE JASJIT SINGH BEDI |
| Court | High Court of Punjab and Haryana |
| Precedent Value | Binding authority within Punjab and Haryana; follows Supreme Court precedent |
| Overrules / Affirms | Affirms Supreme Court jurisprudence in Ashok Shewakramani & others v. State of Andhra Pradesh & another, and Ravi Dhingra v. State of NCT of Delhi & another |
| Type of Law | Criminal Law / Negotiable Instruments Act / Corporate Offences |
| Questions of Law | Whether non-signatory directors can be summoned under Section 138/141 NI Act absent specific averments of being in charge of and responsible for the company’s conduct. |
| Ratio Decidendi | The High Court held that in the absence of specific averments in the complaint that the non-signatory directors were in charge of and responsible for the conduct of the company’s business, prosecution cannot be sustained under Section 141(1) of the NI Act. The complaint must specifically state the individual role and responsibility of each director. Reliance was placed on the binding Supreme Court decisions in Ashok Shewakramani and Ravi Dhingra. Summoning orders and proceedings quashed qua petitioners (non-signatory directors). |
| Judgments Relied Upon | Ashok Shewakramani & others v. State of Andhra Pradesh & another (Criminal Appeal No.879 of 2023); Ravi Dhingra v. State of NCT of Delhi & another (SLP (Crl.) No.13251 of 2023) |
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Supreme Court’s requirement of mandatory averment regarding “in charge of and responsible for” the company at the time of the offence; mere directorship is insufficient for vicarious liability. |
| Facts as Summarised by the Court | Directors were summoned in a complaint under Section 138 NI Act based on dishonour of cheque issued by Abhishek Buda Koti, authorised signatory and director of the accused company. No complaint averments made that petitioners (other directors) were in charge of and responsible for conduct of the company’s affairs. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts within the jurisdiction of Punjab and Haryana High Court |
| Persuasive For | Other High Courts and lower courts outside Punjab and Haryana jurisdiction |
| Follows | Ashok Shewakramani & others v. State of Andhra Pradesh & another (2023); Ravi Dhingra v. State of NCT of Delhi & another (2023) |
What’s New / What Lawyers Should Note
- Reiterates that only those directors specifically averred as “in charge of and responsible for” the conduct of the company’s business can be prosecuted under Section 141(1) NI Act.
- Summoning of directors based solely on their position as directors, without such averments, is impermissible.
- Non-signatory directors must be discharged if mandatory averments are missing in the complaint.
- Lawyers should scrutinize complaints under Section 138/141 NI Act for compliance with these requirements before advising clients or responding to summons.
Summary of Legal Reasoning
- The Court examined whether the complaint contained the mandatory averment as required by Section 141(1) NI Act—that the petitioners (directors) were in charge of and responsible for the conduct of the company at the time of the offence.
- Relied on Supreme Court decisions in Ashok Shewakramani and Ravi Dhingra, which held such an averment is essential for vicarious liability of directors under Section 141(1).
- Noted that in the present case, no such averment was made concerning the petitioners, who were not signatories to the dishonoured cheque.
- Held that mere designation as a director is insufficient—specific role and responsibility must be pleaded.
- Therefore, the absence of such specific averments vitiates the continuation of proceedings against the petitioners.
Arguments by the Parties
Petitioner
- Although the petitioners were directors, the complaint did not state that they were in charge of and responsible for the company’s business at the time of the offence.
- Only the signatory-director was effectively running the business and signed the cheque.
- Cited Supreme Court decisions mandating such averments as a prerequisite for vicarious liability.
Respondent No.2/Complainant
- At the summoning stage, only a prima facie case is needed; sufficiency of evidence for conviction is not required at this stage.
- Directorship is sufficient to attract liability under Section 141(1).
Factual Background
- The complaint originated from the dishonour of a cheque for Rs.13,00,000 issued in partial discharge of legal liability by Abhishek Buda Koti, Director and authorised signatory of Bhadauria Carriers Pvt. Ltd.
- Petitioners (other directors) were summoned by the complaint and order dated 24.02.2022 and 17.05.2022 respectively.
- The complaint lacked any averment about the petitioners being in charge of and responsible for the conduct of the company at the relevant time.
Statutory Analysis
- Section 141(1) of the Negotiable Instruments Act requires that for vicarious liability to attach to directors (other than signatory), the complaint must aver that they were “in charge of, and responsible to the company for the conduct of the business of the company.”
- The Court applied a strict interpretation, following Supreme Court precedent, holding that mere designation as director does not suffice.
- No reading down or expansion was done; rather, reaffirmed existing Supreme Court interpretation.
Alert Indicators
- ✔ Precedent Followed – When existing law is affirmed.